News & Commentary

Hospitals Told: No Gouging

An appeals court in California ruled June 10 that a health plan does not need to pay the chargemaster bill from a hospital. The court ordered a new trial in the case between Children’s Hospital of Central California and Blue Cross of California.

At stake is whether Children’s Hospital, in the midst of a contract dispute with Blue Cross, could bill an insurer at its highest rates (those on the chargemaster) while the two sides did not have a contract.

The decision by the Fifth District Court of Appeals in Fresno, Calif., could have wide-ranging effects on hospitals and health plans in California, according to the Sacramento Business Journal.

The court said that hospitals cannot expect health plans to pay amounts that exceed the actual value of services provided. In 2007 and 2008, fewer than 5% of payers paid the hospital full charges listed on the chargemaster, the court found.

Quoting Dan Baxter, a lawyer who represented Blue Cross, the business journal reported, “This ruling will absolutely change the landscape between hospitals and heath plans in litigation.... It’s a clear-cut California case we didn’t have until now — finally — that says in no uncertain terms you can consider a full body of information, not just billed charges.”

However, Glenn Solomon, a lawyer for Children’s Hospital, told the journal that the decision will be “bad for all patients in California and the health care system in general.”


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